There is mixed evidence on whether the marginal dollar spent on corporate social responsibility is due to agency problems. We propose an approach by modeling how the 2003 dividend tax cut, which increased after-tax insider ownership and better aligned managerial and shareholder interests, affected the marginal dollar spent on firm responsibility. We confirm key predictions of our agency model: following the tax cut, moderate insider-ownership firms experience larger declines in their responsibility ratings and increases in their valuations relative to other firms. We also confirm another implication regarding managerial misalignment using a regression-discontinuity design of close votes on shareholder-governance proposals.

In this study, we examine whether emphasized tone in earnings releases systematically predict managers' insider trading activities in the post earnings releases periods and whether managers' choices of tone placement in earnings releases are motivated by opportunistic incentives. We find that, holding constant the net tone of the overall document, managers make more insider sales (purchases) immediately after earnings releases when positive (negative) tone is presented more prominently in the document. In addition, we document that the relation between tone emphasis and the observed insider trading activities is more (less) pronounced when insiders have greater information advantage or when a firm's overall information environment is more opaque (when a firm has better corporate governance). Overall, our findings suggest that managers use narrative characteristics strategically to facilitate their insider trading and achieve personal gains.

Prior literature finds that staggered state-level adoption of the Inevitable Disclosure Doctrine (IDD) significantly constrains labor mobility. Using the IDD as an exogenous shock to labor mobility, we find that firms headquartered in states that adopt the IDD gravitate towards issuing short-term debt for external debt financing. We examine three mechanisms—default risk, information asymmetry, and agency cost mitigation—through which labor mobility restrictions affect debt maturity. Our results provide support for the information asymmetry mechanism, which suggests that firms are more inclined to use short-term debt when their information environment deteriorates. We find that in the wake of IDD adoption, firms tend to utilize short-term debt only in corporate bond markets and their debt maturity profiles become more concentrated.

Mutual fund families set and report values of their private startup holdings, which affect the fund net asset value (NAV) at which investors buy/sell fund shares. We test three hypotheses related to the valuation practice: (i) information cost/access, (ii) litigation risk, and (iii) strategic NAV management. Consistent with (i), families with larger PE holdings and/or stronger information access update valuations more frequently in the absence of public information releases, their updates co-move less with other families, and their fund returns jump less at follow-on financings. We find no support for hypotheses (ii) or (iii). We also find that high-PE-exposure funds are subject to greater financial fragility.

We find that the staggered passage of state-level laws that legalize marijuana for medical use increases states' borrowing costs by 7–9 basis points. Consistent with economic theory on substance use suggesting that marijuana legalization increases local consumption of the drug (by expanding its availability and reducing its perceived risks), we predict and find that increased consumption represents an important mechanism that explains the higher state bond spreads. We also show that following such laws’ passage, states incur higher marijuana-consumption-related expenditures, including for police, corrections, and public welfare.

Human capital is a major impetus for technological innovation. We examine the relation between the technological dimension of product market competition and the disclosure of skill requirements in job postings. On the one hand, technological competition may raise the urgency of recruiting tech talent and make firms provide more specific skill requirements. On the other hand, technological competition can increase the proprietary costs of skill requirement disclosure. Using technological peer pressure as a measure of technological competition, we find that firms facing intense technological competition provide more specific skill requirements for tech positions, suggesting that the disclosure benefits outweigh the proprietary costs when firms face pressure to innovate. The effect of technological peer pressure is more pronounced among firms that make only incremental innovations and less pronounced among firms that rely on trade secrets or have greater industry peer presence in close geographical proximity. Our study documents a distinct relationship between technological competition and voluntary disclosure targeted to labor market participants.

We show that analyst behavior changes in response to a randomly assigned shock that exogenously varies the timeliness and cost of accessing mandatory disclosures in the cross-section of investors: analysts reduce coverage and issue less optimistic, more accurate, less bold, and less informative forecasts. Our evidence indicates that analysts reduce a strategic component of their behavior: the changes are stronger among analysts with more strategic incentives like affiliated or retail-focused analysts. We conclude that mandatory disclosure can substitute for analyst information production, which is constrained by investors’ ability to verify forecasts using corporate filings.

This paper develops a comprehensive framework to address uncertainty about the correct factor model. Asset pricing inferences draw on a composite model that integrates over competing factor models weighted by posterior probabilities. Evidence shows that unconditional models record near‐zero probabilities, while postearnings announcement drift, quality‐minus‐junk, and intermediary capital are potent factors in conditional asset pricing. Out‐of‐sample, the integrated model performs well, tilting away from subsequently underperforming factors. Model uncertainty makes equities appear considerably riskier, while model disagreement about expected returns spikes during crash episodes. Disagreement spans all return components involving mispricing, factor loadings, and risk premia.

We investigate how the mandatory adoption of International Financial Reporting Standards (IFRS) by publicly listed firms in the European Union affects peer private firms. We find that private firms’ capital investment decreases significantly after the IFRS mandate, relative to public firms. Private firms also display decreased investment when benchmarked against firms relatively insulated from the impact of the IFRS mandate, but the magnitude of the effect is smaller in this case. These results are consistent with the hypothesis that mandatory IFRS reporting (combined with other reforms), while increasing public firms’ financing and investment, crowds out funding for private firms. The effect is more pronounced for larger private firms and in industries where public peers have greater external financing needs. Our evidence suggests that financial reporting regulations cause shifts in resource allocation in an economy.